The Stock Market is Well Valued for Investors Now

The Efficient Market Theory

There is a long held belief that the stock market is the fore-teller of all
that will happen. Somehow it is believed that the market can see into the future,
and the rises or falls in the market foretell what will happen with some accuracy.
Believers, which includes most people, ignore the dramatic rises in the market
before the meltdown of the money market in 2007, or the great crashes of 2008
and 2009. Still, in spite of much evidence to the contrary, this belief persists.

On the other hand, great investors such as Warren Buffet, believe that the
market swings irrationally and that you buy when stocks are irrationally depressed.

The Efficient Market Theory

This theory, known as "The Efficient Market Theory", is also the basis of
Investment Advisors advocating a "Buy and Hold" approach to investing. The
belief is that in due course, the market will always value
a stock fairly, and that stocks tend to rise over time. This theory says
that all stocks are valued properly because all information necessary to value
a stock is available.

A Decision by a Group is Better than an Individual's Decision

The belief is that the stock market, by being valued by the sum of each individual
investment decision, is the total of all of these individual decisions, and
therefore is almost always correct. This theory has been generally accepted
as for some odd and vaguely understood process, a decision made by discussion
among a group, is more often then not, a better decision than would have been
made by any individual. It seems that even if the average knowledge, or IQ,
or technical knowledge, of the group seems lacking or less than adequate, the
decision made by the collective wisdom of this group, is often more accurate
and a better decision than a decision made on the subject than any individual,
no matter the intelligence or understanding of that individual.

Why this group decision is often the best decision, is not really understood,
in spite of many theories. Yet, it seems to be be a valid conclusion.

The corollary of this vaguely understood process, is that because people investing
in the stock market automatically constitute a group, therefore the value of
any stock is properly expressed by its current trading price. Therefore the
sum of all of these stocks, and whether the general stock market index rises
or falls is a correct fore-telling of the future.

The Market Has All Information on Which to Make a Decision

The same theory, which is that a group understands any situation far better
than any individual, states that The Efficient Market Theory means that the
stock market has all of the information necessary to make an informed decision.
Therefore, somehow all knowledge about every stock is known to the market in
general, and the value of that stock, and of all stocks, is established because
the market has all information necessary to come to that valuation.

The Efficient Market Theory is Nonsense

The very fact that Facebook could trade at $38 at opening, then over $40,
then at $28, and now slightly over $30 is proof that the efficient market theory
is nonsense. Another example is often stated by Warren Buffet, who in reference
to the idiosyncrasies of the market, asked why General Motors was worth over
$20 one year, and under $2 the next year. He remarked that it was the same
company, in the same business, doing the same thing, yet depending on when
you look at the stock price, it varies dramatically.

Another Warren Buffet quote is "Most people get interested in stocks when
everyone else is. The time to get interested is when no one else is. You can't
buy what is popular and do well." In other words, the value of any stock fluctuate
dramatically. If the stock market was an efficient barometer of value, the
price would reflect true value at all times, yet it doesn't.

Other Indications of the Folly of this Theory

As time passes, more and more of the stock market volume is as a result of
program trading. Computers now account for over 80% of the trading volume.
These computers trade based on market trends. They rely on sophisticated software
that determines whether a stock is poised to rise or fall. What is more interesting,
is that because there is so much trading based on computer programs, that stock
market rules have had to been continually revised to prevent meltdowns. Computer
trading, also know as program trading, call be a self-fulfilling prophecy.
As one program trades down, other programs watching, see a lower trade and
also trade down to catch the trend. The result can be a precipitous drop in
a matter of minutes. So much for fair valuation of stock values.

The point here is that doom
and gloom pervades the market, and fear is inhibiting most investors.
If a stock is supported by a company with good value, with good underlying
assets, and there is no logical reason for it to have fallen so much, then
that stock is probably a good
value to buy right now. If you don't buy it now, you will look back in
a a few years and bemoan the fact that you didn't buy when the price was
so low. Now is the time to lay the groundwork of getting wealthy.

Larry Cyna, CA, is CEO and Portfolio Advisor to Cymorfund, a boutique hedge
fund. He expresses his insights several times a week on his blog www.cymorfund.com and
offers a free newsletter which can be subscribed to here.

Mr. Cyna is an accomplished investor in the Canadian public markets for over
20 years, and has managed significant portfolios. He is a financing specialist
for private and public companies, and has expertise in real estate and debt
obligations. He has assisted private companies accessing the public markets,
has been a founding director of public companies and is a strategic consultant
to selected clientele.

He is and has been a director, a senior officer and on the Advisory Board
of a number of TSX and TSXV public companies in the mining, resource, technology
and telecommunications sectors, and the Founding Director of two CPC's with
qualifying transactions in mining and minerals. He was an honorary director
of the Rotman School of Management MBA IMC program, has completed the Canadian
Securities Institute Canadian Securities Course & Institute Conduct and
Practices Handbook Course, was a former Manager under contract to an Investment
Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory
Mediation Program, Toronto, a member of the Institute of Corporate Directors
of Ontario, a member of the Upper Canada Dispute Resolution Group, and the
Ontario Bar Association, Alternate Dispute Resolution section.

He obtained his designation as a Chartered Accountant in Ontario in 1971 and
was the recipient of the Founder's Prize for academic achievement together
with a cash reward. He became a CPA in the State of Illinois, USA in 1999
under IQEX with a grade of 92%. He is a Member of the Institute of Chartered
Accountants of Ontario and the Canadian Institute of Chartered Accountants.

He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty
of Law, University of Windsor, certificate in Dispute Resolution from the
Ontario Institute of Chartered Accountants. Previous accomplishments are Manager
of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO
of Cyna & Associates specializing in mediation and ADR; Founder & Senior
Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited
public accountancy firm with international affiliations; and was a partner
in a large public accountancy firm.

Mr. Cyna is well known in the Canadian Investing community. He attends presentations
given by public companies to the industry on a daily basis.. These presentations
are intended by the various hosting companies to present their inside story
for the purpose of attracting funding, or of making parties more interested
in acquiring shares of those companies. Being in constant communication in
this manner keeps Mr. Cyna deeply involved in the current market and leads
to numerous investment opportunities.

Mr. Cyna is currently a Director of Argentum Silver Corporation and Telehop
Communications Inc.